Need-based state grant programs promote educational opportunity, using financial circumstances to allocate aid instead of relying on high school academic achievement or test scores, as merit-based aid does. But the generosity and accessibility of this need-based aid can vary dramatically by state. And in some cases, differences in undergraduate enrollment patterns by racial and ethnic groups can inadvertently lead to the disproportionate exclusion of students of color from receiving grant aid.

To better understand the circumstances that lead to the differential receipt of need-based state grant aid, we examined data on enrollment patterns and state grant aid receipt for Pell grant recipients, both in the nation and within 11 states. Students receiving Pell grants have all applied for financial aid and have weak enough financial circumstances to qualify for federal need-based aid.

We found that only 39 percent of Black Pell grant recipients attending college in their state of residence received need-based grant aid in 2018-19, compared with 49 percent of Asian and 46 percent of white Pell students.

Differences in grant eligibility requirements contribute to disparities

In part, these disparities may stem from differences in state generosity. Washington and New Jersey award more than $1,500 per undergraduate student in need-based grant aid, whereas Arkansas, Georgia, South Dakota, and Wyoming award less than $10 per student. But even within states, the design of grant programs can have varied effects for students from different racial and ethnic groups.

Some state grant programs fund only full-time students, while others fund students enrolled at least half time, generally with prorated awards. California, Maine, and Michigan all fund half-time students but not those enrolled less than half time. In other states, including New Jersey (for public four-year students) and Mississippi, only full-time students are eligible.

Excluding half-time students may disproportionately affect Black and Latino students. In the majority of the 11 states we studied, these students are more likely than others to attend half time (33 percent of Latino students and 31 percent of Black students attend half time compared with 28 percent of all students), but there are exceptions. In North Carolina, Black and white students are equally likely to enroll half time, and in Kentucky, Latino students are less likely than others to enroll half time.

Some states, including California and Texas, reserve most state grant aid for recent high school graduates. These provisions exclude a larger share of Black students than students from other racial and ethnic groups as Black students are less likely to enroll immediately after high school.

High school academic performance requirements that some states add to their need-based state grant programs can also lead to racial and ethnic disparities. California sets a minimum high school grade point average for aid, and at Texas public four-year institutions, priority goes to students with strong high school records.

In general, Black and Latino undergraduates come to college with weaker high school backgrounds than other racial and ethnic groups. Excluding students who are admitted but have weaker high school records from receiving state grant aid may diminish those students’ chances of succeeding in college.

Institution type also affects amount of aid students with low incomes receive

Although enrollment patterns differ by state, nationwide, Black and Latino students are more likely than others to enroll at either public two-year or for-profit institutions. More than half of Pell grant recipients attending four-year institutions received this aid in 2018–19, compared with 36 percent at public two-year institutions and 25 percent at for-profit institutions.

Public two-year college students can face a range of challenges to completing their programs, including covering their living expenses while they’re in school. These students are frequently parents who must pay for child care and work long hours while in school. Kansas and Ohio are among the states that exclude virtually all public two-year college students from their state aid programs, while Connecticut, Pennsylvania, and many other states exclude for-profit students.

Enrollment differences and state practices create disparities in need-based aid distribution

In 6 of the 11 states we studied, Black students with low incomes are substantially less likely than white students with low incomes to receive state need-based aid. In two states, the reverse is true. These outcomes appear to be related to part-time enrollment and age, as well as type of institution attended.

Student demographics and undergraduate enrollment patterns vary significantly among states, which means need-based aid policies have different effects across states. But there’s strong evidence (PDF) that need-based aid increases enrollment and success, particularly among students with lower incomes. States striving to direct need-based aid to the students who most need it for academic success can examine the distribution of aid among students from different racial and ethnic groups in similar financial circumstances and analyze the program characteristics that could be leading to unintended inequities.